The Bank of Japan might raise interest rates in next week's meeting.

The Japanese yen remains steady at 153 yen per dollar, as investors brace for the upcoming policy meeting of the Bank of Japan, which may see the central bank’s interest rate hike amid continuing increases in Tokyo's core inflation. This could encourage the Bank of Japan to adopt a more stringent monetary policy. Additionally, it is expected that the BOJ will announce plans to reduce bond purchases next week, signaling the end of major economic stimulus measures.

Japan’s inflation rate stood at 2.8% year-on-year in June, stable for the second consecutive month and at its highest level since February. Electricity prices rose more than 13.4% after a 14.7% increase the previous month, as the government tries to curb rising energy costs. Meanwhile, gas prices rose for the first time in 13 months, at 2.4%. Food prices also continued to rise steadily.

Tokyo's inflation rate increased by 2.2% year-on-year in July, accelerating for the third consecutive month. This is a significant factor that could lead the central bank to consider tightening monetary policy. Investors expect the Bank of Japan to raise interest rates for the first time in next week's policy meeting to combat the continued inflationary pressures. Additionally, a rate hike would support the yen, leading to reduced costs for importing foreign goods, which could further mitigate inflation.

Japan's leading economic index, which measures economic trends for the coming months from various data such as job postings and consumer confidence, was revised up to 111.2 in May. This increase was supported by the resumption of expansion in the manufacturing sector for the first time in a year, marking the fastest growth rate in 12 months due to increasing new orders. Meanwhile, service sector activity remains strong. However, consumer confidence dropped to its lowest level in six months due to high unemployment rates and rising prices of goods and services, contrary to wages which have not increased significantly.

The yield on 10-year Japanese government bonds rose to 1.06% amid expectations that the Bank of Japan will raise interest rates in next week's meeting. Senior government official Toshimitsu Motegi called for the BoJ to return to a more stringent monetary policy by regularly raising interest rates, expressing concerns over the excessively weak yen which could negatively impact the domestic economy. Additionally, Prime Minister Fumio Kishida stated that this monetary policy adjustment will support Japan’s transition in financial policies and help domestic businesses compete internationally.

Techical analysis data (5H)

Resistance: 154.6, 155, 155.55

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 153.1 - 153.65 but cannot break the support at 153.65, you may set a TP at approximately 155 and SL at around 152.71 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 154.6 - 155, you may set a TP at approximately 155.55 and SL at around 153.1 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 154.6 - 155 but cannot break the resistance at 154.6, you may set a TP at approximately 153.1 and SL at around 155.55 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 153.1 - 153.65, you may set a TP at approximately 152.71 and SL at around 155 or according to your acceptable risk.

Pivot point July 26, 2024 09:01 PM. GMT+7